Savings Groups: An Alternative Solution to Financial Inclusion in the United States

Savings groups are self-directed informal financial cooperatives designed for unbanked or underbanked populations. Members of these groups meet regularly to save together and lend to one another, allowing the group’s deposits to earn a return. At the end of a savings group cycle, members are paid out their deposits, plus any interest earnings. This simple yet innovative model has grown since it was first developed in the country of Niger in 1991; today savings groups are estimated to have reached over 12 million people in 70 countries, transforming lives and communities throughout the world.

A New Development Tool for the US?

One of the countries where savings groups have recently made an appearance is the United States. Based in Des Moines, Iowa, the Solidarity Foundation is a non-profit organization that promotes the savings group model as a safe and convenient way to save and borrow money. In 2016, two pilot savings groups were formed in Des Moines: a refugee/immigrant-based group and an employer-based group. Since then, the Solidarity Foundation has worked with local partner organizations to expand its geographic reach, establishing savings groups in Omaha, Nebraska; Chicago,Illinois; Portland, Oregon, and Atlanta, Georgia. Overall, the Solidarity Foundation has found success with its endeavors in the United States.

What factors have resulted in the adoption and sustainable use of these informal, cooperative-regulated financial model within a highly formal, regulated financial system/economy?

With support from the Solidarity Foundation, Bâton Global conducted a number of interviews with savings group practitioners and participants to answer this question. Highlights of what we found include:

  • Banks are still not easily accessible to everyone in the United States, especially refugees, immigrants, and low-income residents. As an alternative, savings groups offer vulnerable populations the opportunity for financial inclusion.
  • Financial need, accountability, trust, and empowerment/pride are all factors that explain why individuals join savings groups and how the groups sustain themselves.
  • There has been a quicker and more sustained adoption of the model within refugee/immigrant groups compared to native-born groups. However, with assured commitment from members and a strong underlying group bond, native-born savings groups also have the potential to thrive.

Through the savings group methodology, the Solidarity Foundation has assisted individuals across the US with asset development, skills development, and personal development. These groups have helped members reach financial goals and have enabled them to plan for the long-term future. Such success has shown that savings groups are not only a viable solution for financial inclusion in developing countries but can also be used as a development tool in the United States.

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About the Solidarity Foundation

The Solidarity Foundation is a 501(c)3 based in Des Moines, Iowa whose mission is to create pathways out of poverty by teaching money management behaviors to communities in need. The organization partners with non-governmental, governmental and for-profit organizations to provide savings-based programs that meet the unique needs of program participants. To find out more about the Solidarity Foundation, please click here to visit their website.

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May 31, 2019
12:30 pm
Social Impact
Financial Impact
Innovation
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